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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Normal Profit
Monopoly long-run equilibrium
Increasing Cost Industry
Cross-Price Elasticity of Demand
2. Models where firms agree to mutually improve their situation
Average Total Cost (ATC)
Collusive oligopoly
Inferior Goods
Marginal Productivity Theory
3. The imbalance between limited productive resources and unlimited human wants
Normal Profit
Average Product of Labor (APL)
Economies of Scale
Scarcity
4. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Price discrimination
Least-Cost Rule
Profit Maximizing Resource Employment
Cross-Price Elasticity of Demand
5. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Least-Cost Rule
Price discrimination
Perfect competition
Dead Weight Loss
6. The rational decision maker chooses an action if MB = MC
Derived Demand
Substitute Goods
Price floor
Marginal Analysis
7. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Excise Tax
Utility Maximizing Rule
Monopsonist
Marginal Analysis
8. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Income Elasticity
Price inelastic demand
Relative Prices
Normal Profit
9. The mechanism for combining production resources - with existing technology - into finished goods and services
Price discrimination
Inferior Goods
Fixed inputs
Production function
10. The total quantity - or total output of a good produced at each quantity of labor employed
Monopsonist
Total Product of Labor (TPL)
Inferior Goods
Spillover costs
11. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Allocative Efficiency
Necessity
Market power
Excess Capacity
12. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Surplus
Price elasticity
Price Ceiling
Average Product of Labor (APL)
13. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Constant cost industry
Economic Profit
Break-even Point
Oligopoly
14. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Income Effect
Average Variable Cost (AVC)
Total Fixed Costs (TFC)
Allocative Efficiency
15. Exists if a producer can produce more of a good than all other producers
Monopsonist
Complementary Goods
Absolute Advantage
Average Product of Labor (APL)
16. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Spillover benefits
Derived Demand
Monopsonist
Perfectly elastic
17. All firms maximize profit by producing where MR = MC
Constrained Utility Maximization
Spillover benefits
Profit Maximizing Rule
Total Welfare
18. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Law of Supply
Shortage
Market Equilibrium
Specialization
19. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Perfectly competitive long-run equilibrium
Marginal Revenue Product (MRP)
Spillover costs
Total Revenue
20. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Marginal Productivity Theory
Allocative Efficiency
Free-Rider Problem
Long Run
21. A firm that has market power in the factor market (a wage-setter)
Excise Tax
Monopsonist
Least-Cost Rule
Break-even Point
22. Ed = 1
Unit elastic demand
Absolute prices
Scarcity
Monopolistic competition long-run equilibrium
23. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Comparative Advantage
Relative Prices
Price discrimination
Constant cost industry
24. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Determinants of Demand
Utility Maximizing Rule
Price inelastic demand
Production function
25. Entry of new firms shifts the cost curves for all firms upward
Break-even Point
Increasing Cost Industry
Luxury
Income Elasticity
26. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Private goods
Free-Rider Problem
Cartel
Marginal Productivity Theory
27. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Cartel
Monopsonist
Economics
Substitution Effect
28. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Derived Demand
Absolute prices
Law of Increasing Costs
Excess Capacity
29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Marginal Benefit (MB)
Excess Capacity
Allocative Efficiency
30. Ei = (%dQd good X)/(%d Income)
Constrained Utility Maximization
Average Fixed Cost (AFC)
Income Elasticity
Excise Tax
31. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Shutdown Point
Spillover costs
Surplus
Free-Rider Problem
32. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Price elastic demand
Income Elasticity
Economic Growth
33. AVC = TVC/Q
Law of Diminishing Marginal Utility
Positive externality
Average Variable Cost (AVC)
Least-Cost Rule
34. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Incidence of Tax
Income Effect
Average Total Cost (ATC)
Profit Maximizing Rule
35. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Market Economy (Capitalism)
Monopoly
Non-collusive oligopoly
Perfectly elastic
36. Ed = 0 - no response to price change
Monopoly long-run equilibrium
Perfectly inelastic
Price Elasticity of Supply
Marginal Resource Cost (MRC)
37. AFC = TFC/Q
Fixed inputs
Average Variable Cost (AVC)
Market Economy (Capitalism)
Average Fixed Cost (AFC)
38. Ei > 1
Economic Profit
Luxury
Marginal tax rate
Profit Maximizing Resource Employment
39. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Determinants of Labor Demand
Marginal Productivity Theory
Producer surplus
Constrained Utility Maximization
40. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Constrained Utility Maximization
Determinants of Supply
Average Fixed Cost (AFC)
Accounting Profit
41. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Spillover costs
Monopoly long-run equilibrium
Surplus
Incidence of Tax
42. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Constrained Utility Maximization
Shutdown Point
Marginal Analysis
Absolute prices
43. The difference between total revenue and total explicit costs
Relative Prices
Cartel
Marginal Benefit (MB)
Accounting Profit
44. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Consumer surplus
Least-Cost Rule
Monopoly
Total Product of Labor (TPL)
45. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Income Effect
Subsidy
Income Elasticity
Monopolistic competition
46. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Explicit costs
Break-even Point
Accounting Profit
Perfectly inelastic
47. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Free-Rider Problem
Opportunity Cost
Diseconomies of Scale
Law of Demand
48. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Shortage
Total Product of Labor (TPL)
Comparative Advantage
Monopoly
49. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Implicit costs
Substitute Goods
Fixed inputs
Marginal Product of Labor (MPL)
50. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopolistic competition
Normal Goods
Negative externality
Monopoly long-run equilibrium